LFI London Finance & Investment Group Plc

LONDON FINANCE & INVESTMENT GROUP PLC

Final Results

18 September 2020

LONDON FINANCE & INVESTMENT GROUP PLC

(“Lonfin”, “the Company” or “the Group”)

Unaudited Preliminary Results for the year ended 30^th June 2020

Dividend Declaration

London Finance & Investment Group PLC. (LSE: LFI, JSE: LNF), the investment company whose assets primarily consist of Strategic Investments and a General Portfolio, today announces its unaudited Preliminary Results for the year ended 30^th June 2019 and the Board’s Dividend Declaration.

Strategy, Business Model and Investment Policy

Lonfin is an investment company whose objective is to generate growth in shareholder value in real terms over the medium to long term whilst maintaining a progressive dividend policy.

The Group’s investment policy is to invest in a range of ‘Strategic’, ‘General Portfolio’ and from time to time ‘Other Investments’. General Portfolio Investments comprise liquid stock market investments, both in equity instruments and bonds, and, at the Board’s discretion, ‘Other Investments’ are typically property and other physical assets. Strategic Investments are significant investments in smaller UK quoted companies. These are balanced by the General Portfolio, which consists of a broad range of investments in major USA, UK and other European companies which provides a diversified exposure to international equity markets. 

Further information on the Group’s Investment Policy can be found in the Directors’ Report on page 44.

The Group’s net assets per share for 2020 have decreased from the previous year to 50.6p and 17.6% over the last five years. Shareholders’ dividends for 2020 remains the same at 1.15p and increased by 15% over the last five years. Information on the Group’s performance against the Board’s key performance indicators (KPIs) is set out on page 9 of this report. 

Results

• Net assets have reduced to 50.6p per share (2019 restated – 58.5p per share)

• Strategic Investments have decreased in value over the year, from £7,596,000 to £6,291,000

• Strategic investments are yielding 2.6% (2019 – 3.6%)

*    The General Portfolio has decreased, adjusting for investment purchases and sales, over the year, by 13% from £11,383,000 to £9,948,000

*    Fair value movement is £1,265,000

*    No significant increase in Group operating costs

• A final dividend of 0.60p per share is recommended, making a total of 1.15p per share for the year (2019 – 1.15p)

The Company and its subsidiaries (“Group”) recorded an operating profit for the year, before interest, tax and changes to the fair value adjustments of investments of £130,000, compared to an restated operating profit for the previous year, before tax and changes to the fair value adjustments of investments, of £366,000. The significant decrease in fair value of strategic investments that occurred during the year has led to Total Comprehensive Loss for the year of £2,112,000 compared to restated loss of £1,767,000 for the previous year. Basic and headline losses per share are 2.6p (2019- earnings of 2.9p).

Strategic Investments

Strategic Investments have reduced in value by £1,305,000 due to the market movements in the share prices.

Western Selection PLC (“Western”)

The Group holds 7,860,515 ordinary shares, being 43.8%, of the issued share capital of Western.

On 18^th September 2020, Western announced unaudited preliminary results showing a loss after tax of £180,000 for the year to 30^th June 2020 (2019 loss – £2,611,000). Losses per share are 1.0p (2019 -  14.5p).

Western’s Board has not recommend payment of an interim or a final dividend for the year, compared to the payment of an interim dividend of 1.1p for 2019.

Western’s net assets at market value at 30^th June 2020 were £8,127,000 equivalent to 45p per share, a decrease of 29.7% from 64p last year.

Our share of the net assets of Western, including the value of Western’s investments at market value, was £3,560,000 (2019 - £5,005,000). The fair value for Western recorded in the Statement of Financial Position is the market value of £2,751,000 (2019 - £3,576,000). This represents 17.3% (2019 – 19.3%) of the net assets of the Group.

Western’s objective is to generate growth in value for shareholders over the medium to long term and pay a progressive dividend. Western’s business model is to take sizeable minority stakes in relatively small companies usually before or as their shares are admitted to trading on one of the UK’s stock exchanges and have directors in common through which they can provide advice and support for these growing companies. These may or may not become associated companies. The aim is that these companies (“Core Holdings”) will grow to a stage at which Western’s support is no longer required and its stake can be sold over time into the relevant stock market. Companies that are targeted as Core Holdings will have an experienced management team, a credible business model and good prospects for growth.

Western is a strategic investment which is technically a subsidiary of the Company that has not been consolidated due to the application of the investment entity exemption under IFRS 10.

David Marshall is the Chairman of Western and Edward Beale is non-executive director.

Western’s main Core Holdings are Northbridge Industrial Services plc, Brand Architekts Group plc and Bilby Plc. 

An extract from Western’s announcement on 18^th September 2020 relating to its main Core Holdings is set out below:

Core Holdings

Northbridge Industrial Services plc (“Northbridge”)

Northbridge hires and sells specialist industrial equipment to a non-cyclical customer base. With offices or agents in the UK, USA, Dubai, Germany, Belgium, France, Australia, New Zealand, China and Singapore, Northbridge has a global customer base. This includes utility companies, the oil and gas sector, shipping, construction and the public sector. The product range includes loadbanks, transformers and oil tools. Further information about Northbridge is available on their website: www.northbridgegroup.co.uk

Northbridge, which is admitted to trading on AIM, announced its results for the year ended 31 December 2019 on 7 April 2020 and recorded a loss after tax of £236,000 for the year (2018- loss after tax £2,409,000). No dividend was recommended by Northbridge and no dividends were received by Western from Northbridge during the year (2019 - £Nil).

Western holds 3,300,000 Northbridge shares which represents 11.8% of Northbridge’s issued share capital. The market value of this investment at 30 June 2020 was £2,739,000 (2019 - £4,900,500) which represents approximately 33.7% (2019 – 42 %) of Western’s net assets.

Brand Architekts Group plc (“BAG”)

BAG, which is admitted to trading on AIM, is a beauty brands business specialising in the delivery a growing portfolio of innovative and exciting new products, spanning areas such as haircare, skincare and body care, to consumers and retailers. Further information about BAG is available on its website: https://www.brandarchitekts.com/

BAG announced its interim results for the 28 week period ended 11 January 2020 on 10 March 2020 and reported profit after tax of £6,600,000 (2019 final results for the 52 week period - £3,640,000). This figure was heavily impacted by the profit of £8.8m on disposal of its manufacturing business, offset by a loss on discontinued operations of £2.5m.

Western holds 1,300,000 BAG shares which represents 7.6% of BAG’s issued share capital. The market value has decreased to £1,625,000 (2019 - £2,502,000), which represents approximately 20% (2019 – 21.4%) of Western’s net assets.

Edward Beale is a non-executive director of BAG.

Bilby Plc (“Bilby”)

Bilby is an established, and award winning, provider of gas installation, maintenance and general building services to local authority and housing associations across London and South East England. They have a strategy of growing organically and by acquisition. Further information about Bilby is available on their website: www.bilbyplc.com.

Bilby, which is admitted to trading on AIM, announced its results for the year ended 31 March 2020 on 27 July 2020 showing a profit after tax of £1,379,000 compared to a loss after tax of £8,596,000 for the previous year ended 31 March 2019. No interim dividends were paid during the year and Bilby’s Board did not recommend a final dividend (2019 - £67,500).

Western holds 6,336,363 Bilby shares which represents 10.79% of Bilby’s issued share capital. Following the additional £400,000 acquisitions during the year, the market value of this investment on 30 June 2020 has increased to £1,235,590 (2019- £877,000),which represents approximately 15.2% (2019 – 7.5%) of Western’s net assets.

Associated Companies

Tudor Rose International Limited (“Tudor Rose International”)

As announced in our final results on 30 September 2019, this investment had been fully provided against. With effect from 8 April 2020 the Company sold its entire shareholding of 441,090 A Ordinary shares and 175,000,000 Preference shares in Tudor Rose International for £3 plus contingent deferred consideration and an option to repurchase the shares at the same value. The option to repurchase the shares may be exercised on any date between 1 April 2022 and 31 March 2023. No deferred consideration is expected, and the Board does not expect to exercise the option to repurchase the shares.

Edward Beale and David Marshall resigned as directors of the Company with effect from 11 March 2020.

Finsbury Food Group plc (“Finsbury”)

Finsbury is one of the largest producers and suppliers of premium cakes, bread and morning goods in the UK and currently supplies most of the UK's major supermarket chains. Further information about Finsbury, which is admitted to trading on AIM, is available on its website: www.finsburyfoods.co.uk

At 30^th June 2020, Lonfin held 6,000,000 Finsbury shares, representing 4.6% of Finsbury’s issued share capital. The market value of the holding was £3,540,000 as at 30^th June 2020 (cost - £1,724,000) and represents approximately 22% (2019 – 22%) of Lonfin’s net assets.

As at the date of publication, Finsbury has not announced their final results for the year ended 30^th June 2020 to be able to present in these financial statements.

Edward Beale was a non-executive director of Finsbury up until 23^rd November 2016.

General Portfolio

The investments comprising the General Portfolio at 30^th June 2020 are below:

Composition of General Portfolio

At 30^th June 2020

The portfolio is diverse with material interests in Food and Beverages, Natural Resources, Chemicals and Tobacco. We believe that the portfolio of quality companies we hold has the potential to outperform the market in the medium to long term.

At 30^th June 2020, the number of holdings in the General Portfolio was 31 (2019 – 30). We have decreased the amount invested in the General Portfolio over the year by £170,000 (2019 - decreased by £49,000).

The opening value of our General Portfolio investments at 30^th June 2019 was £11,383,000 which compared with a cost of such investments at the same date of £6,208,000. After investment purchases

during the year of £163,000 and investment sales (including selling expenses) during the same period of £966,000, the value of the General Portfolio investments as at 30^th June 2020 had decreased by 13% to £9,948,000. Further details of our General Portfolio investments are set out on page 12.

Board Changes

Whilst the Board is satisfied that it has a sufficient spread of skills, experience and support within the Board to operate the Company and to develop the Company’s investment business, the Board will continue to seek further suitable Board candidates who can add value to the Board.

Operations, Directors and Employees

All of our operations and those of Western, with the exception of investment selection, are outsourced to our subsidiary, City Group PLC (“City Group”). City Group also provides office accommodation, company secretarial, finance and head office services to a number of other companies. City Group is responsible for the initial identification and appraisal of potential new strategic investments for the Company and the day to day monitoring of existing strategic investments and employs 6 people.

Dividend

The Board recommends a final dividend of 0.60p (ZAR 12.61848 cents) per share, making a total of 1.15p (ZAR 24.18542 cents) per ordinary share for the year (2019 – 1.15p). Subject to shareholders’ approval at the Company’s AGM to be held on Wednesday, 25^th November 2020, the dividend will be paid on Wednesday, 2^nd December 2020 to those shareholders on the register at the close of business on Friday, 20^th November 2020. Shareholders on the South African register will receive their dividend in South African rand converted from sterling at the closing rate of exchange on Thursday, 17^th September 2020 being GBP1= ZAR 21.0308

JSE Disclosure Requirements

In respect of the normal gross cash dividend, and in terms of the South African Tax Act, the following dividend tax ruling only applies to those shareholders who are registered on the South African register on Friday, 20^th November 2020. 

• The number of shares in issue as at the dividend declaration date is 31,207,479;

• The dividend has been declared from income reserves. Funds are sourced from the Company’s main bank account in London and is regarded as a foreign dividend by South African shareholders; and

• The Company’s UK Income Tax reference number is 948/L32120.

Dividend dates:

The JSE Listings Requirements require disclosure of additional information in relation to any dividend payments.

Shareholders registered on the South African register are advised that a dividend withholding tax will be withheld from the gross final dividend amount of ZAR 12.61848  cents per share at a rate of 20% unless a shareholder qualifies for an exemption; shareholders registered on the South African register who do not qualify for an exemption will therefore receive a net dividend of ZAR 10.094784 cents per share.  The dividend withholding tax and the information contained in this paragraph is only of direct application to shareholders registered on the South African register, who should direct any questions about the application of the dividend withholding tax to Computershare Investor Services (Pty) Limited, Tel: +27 11 370 5000.

Share certificates may not be de-materialised or re-materialised between Wednesday, 18^th November 2020 and Friday, 20^th November 2020, both days inclusive.  Shares may not be transferred between the registers in London and South Africa during this period either.

Outlook

The continued political and economic uncertainty in Europe, where a Brexit trade deal has yet to be delivered, and globally, with Covid-19 and the negative impact from tariff issues, will clearly impact on world economies and we can expect further volatility and turbulence in the markets ahead. Whilst the last 12 months have been challenging for the Group’s investments, particularly its Strategic Investments, and we can expect further challenges ahead, the Board is confident that the Group has a solid base of investments which can lead to further capital growth in the medium to long term.

Future Developments

The Group’s development and its financial performance are dependent on the success of its Investment Strategy and the continued support of its Shareholders. Against a background of challenging and uncertain times in the markets particularly due to Covid-19, the Board continues to seek out investments which will generate growth in shareholder value. The Board also continues to monitor and enhance the quality of investments in the General Portfolio. A resolution was put to Shareholders at last year’s AGM to amend the Company’s Investment Policy so that up to 40 investments may be held in the Company’s General Portfolio at any time. The resolution was approved. Aside from this change, the Board continues to pursue its current Investment Policy and has no plans to make any further changes to the policy in the near future. As at 30^th June 2020, the Company held 31 investments in the General Portfolio.

18 September 2020

The Company’s 2020 Annual Report and Accounts will be finalised shortly and sent to shareholders.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

The directors of the Company accept responsibility for the contents of this announcement.

For further information, please contact:

London Finance & Investment Group PLC: 020 7796 9060
David Marshall/Edward Beale)

Johannesburg Sponsor: 
Sasfin Capital (a member of the Sasfin Group)

Consolidated Statement of Total Comprehensive Income

For the year ended 30^th June                                                                                                              

Consolidated Statement of Financial Position

At 30^th June

Company Statement of Financial Position

At 30^th June

Under Section 408 of the Companies Act 2006, the Parent Company is exempt from the requirement to present its own income statement.

Consolidated Statement of Cash Flows

For the year ended 30th June

Company Statement of Cash Flows

For the year ended 30^th June

Consolidated Statement of Changes in Shareholders’ Equity

Company Statement of Changes in Shareholders’ Equity

Notes:

1. Basic earnings per share and Headline earnings per share

Basic (loss)/earnings per share, based on the loss attributable to the shareholders after tax and non-controlling interests of £807,000 (2019 – restated profit £908,000) and on 31,207,479 shares issued

Headline earnings are required to be disclosed by the JSE.

Headline (loss)/earnings per share are based on the loss attributable to the shareholders after tax and non-controlling interests, before unrealised changes in the fair value of investments net of tax, of £807,000 (2019 – restated profit £908,000) and on 31,207,479 shares issued plus 80,000 share options granted in 2016.

1. Net assets per share

The net assets per share are calculated taking investments at fair value and on 31,207,479 shares (2019– 31,207,479) being the weighted average of the number of shares in issue during the year.

1. Financial information

   The financial information in this preliminary announcement does not constitute the Company’s statutory accounts for the year ended 30^th June 2020 within the meaning of Section 435 of the Companies Act 2006.

   The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The accounts are prepared on the historical cost bases, except for certain assets and liabilities which are measured at fair value, in accordance with IFRS. The audited accounts for the Group for the year ended 30^th June 2019 were reported on with an unqualified audit report and did not contain an emphasis of matter paragraph or any statement under section 498 of the Companies Act 2006 and have been delivered to the Registrar of Companies.

2. Copies of this Announcement

   Copies of this announcement are held at the Company’s registered office, 1 Ely Place, London, EC1N 6RY (tel. 020 7796 9060) and are available for a period of 14 days from the date of this announcement.